In the United States, inflation remained stable at +3.7% annual variation in September. Compared to the previous month, consumer prices increased by another 0.4% (compared to 0.6% in August). As for underlying inflation (excluding energy and food) fell to 4.1% compared to 4.3% in August.
Investors were eagerly awaiting these figures, which should increase visibility regarding the trajectory of American monetary policy in the coming months. But in the end, they brought almost nothing new. Taken together, they point to inflation, which is undoubtedly no longer soaring as in the recent past but remains far from the objective of the American Federal Reserve (2.0%).
Do not expect changes in the monetary policy
Therefore, the outcome of the next monetary policy meeting – which we will know on November 1 – remains uncertain, but investors are betting that the status quo will remain in place.
Indeed, the rise in interest rates (both on the bond market and real estate loans) is part of the Fed's job, increasing the cost of credit and slowing down economic activity. Having experienced peaks of more than 4.8% and now 4.6% - levels that investors had not seen for a decade and a half - the American 10-year rate, which serves as a benchmark for the global financial system, is at levels already restrictive for economic activity.
As for the fixed rate on 30-year mortgage loans, which serves as a benchmark for the American real estate market, it reached 7.67%, according to the MBA. Enough to significantly slow down demand in this market.
Rates shall remain high for a long time
However, if investors expect a stabilization of key rates for the remainder of the year, only some are setting key rates lower before Spring/Summer 2024. Rates will, therefore, remain high for a long time, ultimately slowing down the economy.
We are, therefore, witnessing a change in the profile of American growth. While the year 2023 should mark the slump in activity and that of 2024 should be marked by the return of growth, the American economy is finally doing better than expected in 2023, and it is only in 2024 that the slump will be felt.
We remain invested in American financial assets, both on the equity markets, which continue to benefit from the locomotive that the champions of technology are and, in particular, the magnificent seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), and on the bond markets which at this stage offer attractive returns in our eyes.
